Entertainment

Would Yahoo Be Smart To Pursue A Google Handout Now?

It didn’t take very long for Google-Yahoo dealings in the form of a search advertising trial partnership to appear to US Department of Justice like a great big juicy red flag. The two giants looked to be all but asking for some good old anti-trust scrutiny and speculation. The attention has only been compounded by their cozy moment last month, when the two Web giants started to hold hands while Yahoo was very much in the process of fending off stubborn advances by Microsoft for a buyout. Of course, as we’ve all been made well aware, Microsoft withdrew its bid. Yet Google is still quite interested in continue to talk with Yahoo, as our own Stan Schroeder explained earlier this week.

Perhaps they continue to converse about the possibility of some kind of extension to brief rendezvous because it did in fact turned out quite good for them both. Good for Google, because, well, it’s another big, lucrative deal for Mountain View to milk with greedy abandon, and good for Yahoo because shareholders expect to see better numbers to justify the company’s stubborn refusal of a purchase, and it seemingly delivered, albeit temporarily. (And hey, let’s face it, it’ll certainly take more than a week or two to offer a real semblance of substantive growth - above and beyond what Yahoo has been able to accomplish all its own with its lackluster Panama framework.)

Be that as it may, the number of parties looking at the potential for more business between Google and Yahoo now involve entities far beyond the DOJ and various pro-competition pundits. Strangely so, even. According to the AP, “a coalition of 16 civil rights and rural advocacy groups, including the Black Leadership Forum and the League of Rural Voters...urged federal regulators to investigate the potential combination.” Even the American Corn Growers’ Association signed the collective request for an investigation if Google and Yahoo are to propose some type of joint venture. Which is just...wow. The folks working the high-fructose, corn-on-cob, and ethanol angles are suspicious of Google-Yahoo ties. That must say something. I don’t know what, precisely. But it can’t be good.

Yahoo is certainly in a peculiar place at the moment. It has not seen its stock price plummet following Microsoft’s abandonment of its bid, as many suspected it would, including myself. (Going into the weekend, it sits a few cents shy of $26, which is roughly $7 more than where it lay prior to Microsoft’s glorious $44.6B public offer.) But that may hinge on a deal with Google. Which, given anti-competitive concerns, likely wouldn’t be granted by regulators.

Unless of course it is done with some understatement and a good bit of finesse. That could help finagle the two a techno-savvy green light. Google and Yahoo have forged ties in the past, well before Yahoo got desperate and hastily offered some page space to Google-supplied advertising in order to induce Steve Ballmer into throwing a fit. Of course, whether that tactic proved effective, we may never really know. Executives of vast corporations aren’t the most forthcoming people, as one might imagine.

Now, here’s the thing. Regardless of whether Google and Yahoo do strike an arrangement, Yahoo has essentially proven that it is unable to effectively operate alone in an industry where Google is many paces ahead. It pushed Panama heavily. Yet it wasn’t at all the growth engine Yahoo purported it would be. And given that that is the area in which financial success is essentially attained, Yahoo has appeared little more than a tolerable disappointment. It makes a profit. It employs lots and lots of people. But given its leader status in Web traffic, its image as an underperformer shadows the brand. Which can’t be making investors a happy bunch. And despite Yahoo’s insistence that it is worth significantly more than its market value, whether it be $19 or $26 or $31 or even $33 or $37, the fact of the matter is that, because Yahoo is a publicly traded entity, Jerry Yang shouldn’t get to decide what the appropriate price is for the company. He may retain the title of co-founder, along with David Filo, but the choice to go IPO many years ago and allow public investors to determine Yahoo’s worth does speak volumes.

All in all, there seems to be at least one thing that the CEOs of Yahoo and Microsoft have in common: Yang and Ballmer are evidently both uncertain of the future of their respective companies.

Ballmer was willing to purchase Yahoo for the sake of expanding its influence on the Web and creating a real challenger to Google, based largely on the agglomeration of its users as well as those of Yahoo. Which essentially showed Microsoft as having little else than a big bank account to give Mountain View some competition. That may well constitute weakness and lack of innovation. Yang, meanwhile, is in such a gloomy place that he has shown himself as willing to entertain a deal with a party (Google) that has spent the past several years or so driving hard to add to its own ad market share while keeping Yahoo and any other competitors at a very distant #2, #3, etc. These choices reveal much. I dare say very much.

In closing, I’ll say this. Some kind of Google-Yahoo venture may happen. It may not. But if it does, it will not go anywhere in rescuing Yahoo from its present stasis. Improvements have to be made from the inside, and Yang seems to be having a hard time in getting to the end of the tunnel. So maybe he’s not the one to lead the company forward. Google could only act as a band-aid for so long. It really has no incentive to play a well-paid hero for a while. So, in then end, what would Yahoo be getting? The way I see it, a boost. And then an equally swift drop.

Time for the Yahoo board to make some tough decisions, huh? What are the chances that they make some good ones in the months ahead?

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